Council divided on plan to spread $100,000 in impact fees over a decade interest free

A sharply divided Payson Town Council last week overrode a recently adopted ordinance to give a new restaurant an interest-free payment plan for its water development fees.

A new Culver’s restaurant will owe about $100,000 in water impact fees, which the town charges new businesses to help pay the costs of the Blue Ridge pipeline.

The restaurant owners asked to spread those payments out over the next decade with $841-per-month payments.

The request provoked a rare split vote by the council and Councilor Ed Blair’s insistence that waiving the interest amounts to a “sweetheart deal.”

The council debate to give the restaurant a break on the timing of its payments took place in the shadow of the Legislature’s adoption of SB 1625, which would essentially eliminate most impact fees by 2014. That bill could have a devastating impact on Payson’s plans to pay for the $30 million Blue Ridge pipeline with money raised by a $7,500 per-unit water impact fee. The town also charges several thousand in impact fees for police and recreation services.

SB 1625 passed over the strenuous objections of cities and towns statewide and Gov. Jan Brewer has reportedly promised to veto it.

Back in February, the Payson Town Council approved an ordinance that allowed such an extension, but that ordinance indicated the business should pay interest on the deferred fees.

Buzz Walker, who heads the town’s water department, recommended that the council not charge the Payson Restaurant Alliance, LLC, interest on the deferred payment.

Charging 3 percent interest would cost the business roughly $20,000 to $30,000 over the course of a decade.

Councilor Fred Carpenter questioned that recommendation.

“According to the ordinance we adopted last fall, interest is supposed to be charged,” said Carpenter, a former town manager.

However, Walker replied that the town’s water department no longer operates on a “cash-up-front” approach, since it will have to finance the Blue Ridge pipeline over a 40- to 50-year term, hopefully with low-cost, federal loans. In that case, said Walker, a contract guaranteeing a monthly revenue stream can be used to underwrite the bonds.

“Now it doesn’t make any difference whether you have the money in the bank” or have the monthly revenue, said Walker. As a result, he recommended not charging interest as part of the town’s effort to lure new businesses.

“We want to be as business friendly as we could, so it seems like this new approach should probably be the policy from now on,” said Walker.

The town council has lately adopted a get-tough policy when it comes to imposing town fees for something like putting up street barriers for special events, building fees for projects built by charities like Habitat for Humanity and Payson Community Kids. The council has repeatedly rejected pleas for fee waivers from those and other groups in the past three months.

Carpenter asked Town Attorney Tim Wright whether the language in the ordinance indicating the town would charge interest on deferred fees would include an interest rate of zero.

“I can give you the lawyerly answer and say that I could argue that either way,” said Wright. “Zero is a rate and you could pick that rate, but it’s a rate that’s functionally non-existent.”

“This makes the town a bank to a chain restaurant. What will the people at Macky’s and Gerardo’s and Fargo’s think when they learn we’re giving a chain restaurant a tremendous break?” asked Blair.

“I had one citizen call me and say that he felt that would be unjust.”

But Walker said the town sometimes changes the rules. “And when the rules change and we require a new business to do something, then that’s something everyone who came before didn’t have to do. Changing times dictate changing rules — that’s how we operate. If we do things the way we’ve always done them, maybe they were the wrong things to do (before).”

Blair protested that the council had just adopted the ordinance requiring interest payments. “We already set the policy,” he said.

Councilor Michael Hughes countered, “I don’t think one case sets policy all the way down the line.”

Blair objected immediately to making an exception to the policy on charging interest.

“Development fees are very important to our town. Every time they bring in new development, that increases the cost of services. Citizens are telling me that when a new Thai restaurant comes in, that doesn’t help the two existing Chinese restaurants. This sounds like a sweetheart deal for a chain to come in and compete with our family restaurants. It just doesn’t sound right.”

However, Councilor Su Connell said “I think it’s right to go ahead (and waive the interest) and people should have good competition. It is the risk of doing business, so I welcome new businesses here. Thai is different from Chinese which is different from Cantonese.”

Blair then moved to charge the restaurant 1 percent interest on the $100,000 in deferred water impact fees.

That motion failed on a 2-5 vote, with Blair and Carpenter both supporting the nominal interest charge. The council then approved Walker’s recommendation of an interest-free deferral on the same 5-2 vote.